6 Overview of Approved QFII License and Quota Source of the information: CSRC and SAFE Hainan Training April 2012 & CSRC and SAFE website 2003 initial total quota was USD4 billion 2005 total QFII quota increased to USD10 billion 2007 total QFII quota increased to USD30 billion at year-end as a result of the second China-US Strategic and Economic dialogue 2012 total QFII quota increased to USD80 billion in early April 2013 total QFII quota increased to USD150 billion in mid July 6 RESTRICTED

10 Who Qualifies for QFII Status? QFII Eligibility Criteria: Type of Institution Asset Management [Old: Fund Management ] Track Record and Operational Experience 2 years or more [Old: 5 years or more] Assets under Management Not less than US$500 million in securities assets in the last financial year [Old: not less than US$5 billion in the last financial year] Paid in Capital Ranking in World Insurance companies 2 years or more [Old: 5 years or more] Not less than US$500 million in securities assets in the last financial year [Old: not less than US$5 billion in the last financial year] Securities companies 5 years or more [Old: 30 years or more] Not less than US$500 million in net assets and not less than US$5 billion in securities assets in the last financial year [Old: not less than USD$10 billion in the last financial year] [Old: US$1 billion] Commercial banks 10 years or more [Old: ] Not less than US$300 million in tier one capital and not less than US$5 billion in securities assets in the last financial year [Old: not less than USD$10 billion in the last financial year] [Old: total assets ranked in top 100 banks in the world] Others (pension fund, charity fund, endowment fund, trust company, government investment institution) 2 years or more [Old: 5 years or more] Not less than US$500 million in securities assets in the last financial year [Old: not less than USD$5 billion in the last financial year] Note: Only investors domiciled in countries or regions where the securities regulatory authorities have signed a Memorandum of Understanding with the CSRC are eligible to apply for QFII status 10 RESTRICTED On 27 July 2012, the CSRC officially released the revised 'Circular on Relevant Issues Concerning Implementation of the Measures on the Administration of the Domestic Securities Investment of Qualified Foreign Institutional Investors' (the '2012 CSRC circular')

11 CSRC/SAFE Reviewing Approach License and quota approval process CSRC Priority given to mid to long-term investors such as sovereign wealth funds (SWF), pension funds, endowment funds, charity funds and insurance funds Priority given to applicants from countries that do not yet have any QFII e.g. Russia, India, Latin America, Middle East, Eastern Europe Follow the certain assets allocation ratio e.g. no less than 50% of total assets should be invested in equity, no more than 20% of the total assets in cash Applicant must be the actual user of quota. Transfer of quota is prohibited Issuing of structured products (except ETF products) is prohibited SAFE Approval based on economic and financial situation, balance of payments and securities market conditions The application for investment quota must not be lower than USD50 million and may not be higher than USD1 billion on an accumulative basis, except for SWF, central banks and monetary authorities. QFII shall apply for a quota amount according to their business plan and the ability to manage/raise funding It is recommended by CSRC that SAFE shall not grant additional quota approval to existing QFIIs who did not fully utilize their approved quota, e.g. consistently high cash ratio >20% Second and subsequent applicants from the same group is acceptable if they assure that there are proper internal compliance arrangements among themselves 11 RESTRICTED

15 HSBC Securities Services China A Snapshot Widely recognized prestige Best Direct Custody in 2012 Best Sub-Custodian for a recordbreaking 9 years in a row Always the FIRST to market 1992: The first and only onshore-based foreign bank to offer B-share custody 2003: One of the first foreign custodians to offer QFII custody 2005: The first foreign custodian bank to offer custody services in CIBM 2009: One of the first two foreign banks to offer QFII cash clearing services Best Sub-custodian in the Asset's Triple A Securities and Fund Services Awards 2013 Best Sub-Custodian in The Asset s Asian Awards for 8 consecutive years Ranked No.1 by Global Investor s Sub-Custody Survey in 2012/2013 Top Rated by Global Custodian magazine since 1995 No. 1 Top Rated by Leading Clients from : The first foreign bank to conduct bond trading and settlement in CIBM 2011: The first QFII custodian bank to clear the ETF creation/redemption 2011: The first foreign custodian bank to offer RQFII custody 2012: The only foreign bank introducing foreign insurance companies into CIBM 2013: One of the first QFII custodians to facilitate QFII trading into index futures Key differentiators Dominant market share in cross-border businesses The only foreign bank with full scope services (B-share, QFII, RQFII, CIBM) Deep understanding of overseas investors, local regulations and China market Always the first port of call for regulators during consultation The largest and the most experienced team of people servicing X-border investments (106 employees) Average management experience of 10 years, with an operations team working on day/night shifts, and a 100% success rate in QFII application 15 RESTRICTED

16 Key Differentiators Close Relationship with Regulators Market Advocacy Milestones and Influences Worked closely with regulators to formulate QFII provisional measures. Chaired 4 out of 6 topics in the amendments to QFII rules and edited the final recommendation paper submitted to the State Council. Opened the 1 st QFII-Fund account and have the Fund being recognized as beneficial owner before CSRC Measures announced. Invited by SSE to discuss the impact of introducing QFIIs to the fixed income platform. Provided recommendation and analysis on operational processes and settlement risks. Opened a join-name account for non-openended China fund QFII. Led the discussion with tax authorities to clarify the requirement of tax certificate for profit repatriation. Being the first foreign bank obtained the settlement agent license in interbank bond market. Led the discussion on the next development phase for the QFII scheme as end of 2012 will be the10th anniversary of the scheme. One of the four custodians invited by SAT, CSRC and SAFE for a close door discussion on CGT issues Started onshore custody services. One of the first foreign banks authorized to provide custody services to QFIIs. Initiated discussions with CSDCC to implement true DVP. Being the first to obtain the Being one of the first Being the only foreign QFII custodian bank license foreign banks to obtain the custodian bank invited to succeed QFII business. clearing bank license and by PBOC to comment The only foreign bank the first to provide the cash on the draft rules invited by CFFEX/CSRC to clearing for our QFII clients. which would allow discuss financial futures. Two QFII applicants QFIIs to open multiple Constantly invited by changed its local custodian Special RMB accounts SAFE to discuss revised bank to HSBC. for index futures draft QFII rules and Led and formed the trading. provided collective inputs lobbying group to crystallize Being the first and from QFIIs. WHT issue for both QFII only foreign custodian 16 and B-share investors. for RQFII RESTRICTED

17 Disclaimer This document is issued by The Hongkong and Shanghai Banking Corporation Limited (HSBC). The information contained herein is derived from sources we believe to be reliable, but which we have not independently verified. HSBC makes no representation or warranty (express or implied) of any nature nor is any responsibility of any kind accepted with respect to the completeness or accuracy of any information, projection, representation or warranty (expressed or implied) in, or omission from, this document. No liability is accepted whatsoever for any direct, indirect or consequential loss arising from the use of or reliance on this document or any information contained herein by the recipient or any third party. Any examples given are for the purposes of illustration only. The opinions in this document constitute our present judgment, which is subject to change without notice. This document does not constitute an offer or solicitation for, or advice that you should enter into, the purchase or sale of any security, commodity or other investment product or investment agreement, or any other contract, agreement or structure whatsoever and is intended for institutional, professional or sophisticated customers and is not intended for the use of private individual or retail customers. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient. Recipients should not rely on this document in making any investment decision and should make their own independent appraisal of and investigations into the information and any investment, product or transaction described in this document. Unless governing law permits otherwise, you must contact a HSBC Group member in your home jurisdiction if you wish to use HSBC Group services in effecting a transaction in any investment mentioned in this document. This document, which is confidential and not for public circulation, must not be copied, transferred or the content disclosed, in whole or in part, to any third party. The document should be read in its entirety. Copyright. The Hongkong and Shanghai Banking Corporation Limited ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the Hongkong and Shanghai Banking Corporation Limited. All the information set out in this presentation is provided on the best of the Bank's current knowledge and understanding of the relevant law, rules, regulations, directions and guidelines governing or otherwise applicable to RMB trade services but the Bank makes no guarantee, representation or warranty and accepts no liability as to its accuracy or completeness. Please refer to any updates that shall be published or issued by our Bank from time to time including notices that we place at our HSBC branches. 17 RESTRICTED

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